Mobilicity backers sue Canadian government for C$1.2 billion

TORONTO (Reuters) - Quadrangle Group, a private equity backer of Mobilicity, has sued the Canadian government for C$1.2 billion ($1.1 billion), accusing it of reneging on pledges to help the small wireless provider compete against the country's biggest phone companies.

New York-based Quadrangle filed a statement of claim in the Ontario Superior Court of Justice against Industry Canada on Friday, claiming negligence, misrepresentation, breach of contract and abuse of public office.

Quadrangle and fellow Mobilicity investor Data & Audio-Visual Enterprises Investments Inc said in the lawsuit that they had put hundreds of millions of dollars in the new, low-cost entrant to Canada's wireless industry after the government body assured it of favorable terms that were subsequently breached.

The plaintiffs said Industry Canada had told Mobilicity founder John Bitove that it would prevent unfair competition from established operators and create market conditions allowing new challengers to compete effectively.

Mobilicity is under creditor protection, and its subscribers have drifted away because of the uncertainty.

A spokesman for Industry Minister James Moore declined to comment on the grounds that the matter was before the courts.